Toyota Production System

Topics: Six Sigma, Toyota Production System, Lean manufacturing Pages: 11 (3650 words) Published: November 1, 2014
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Toyota Production System
Collected by: Vincent Gaspersz
Lean Six Sigma Master Black Belt
Toyota's production ethos has helped steer it to the top. But can these principles be implemeted throughout the business?
In 2007 or 2008, Toyota is expected to overtake General Motors as the world’s biggest vehicle manufacturer.
In the year to March 2006, Toyota sold almost eight million vehicles around the world, and has set itself the target of selling 10.3 million by 2010. By that date, production in Europe is due to increase to 1.2 million vehicles. However, the Japanese carmaker is expanding production dramatically around the world, building factories in China, Russia, the US and south-east Asia.

The latest financial results highlight Toyota’s success. For the year ending March 2006, Toyota achieved record sales of ¥21,037bn (£94.6bn). The carmaker’s full-year operating income increased 12% to ¥1,878bn. Its recorded net income of ¥1,372bn represents an increase of 17% – the fourth consecutive annual increase.

However, net income is not expected to rise next year, due to a stronger yen and higher raw materials costs. Nevertheless, when announcing the company’s annual results, Katsuaki Watanabe, Toyota’s president, said the company would aim to maintain an operating profit-to-sales ratio of around 9%, having achieved an operating margin of 8.9% in the year to March 2006.

Research pays
Part of Toyota’s success stems from its high levels of research and development investment and its commitment to launching new vehicles that meet the mood of the times. The car maker has announced, for example, that it is planning to sell ethanolpowered vehicles in the US by 2008. Its fuel-efficient hybrid petrol-electric systems are already well established.

Toyota’s recent history has not been problem-free, however. Last autumn, it had to recall almost 1.3 million cars, such as the Corolla and Vitz, because of a defective headlight switch design. During 2005, it recalled 1.88 million vehicles. This July alone, Toyota recalled more than 380,000 Lexus and Toyota Highlander vehicles globally.

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Meanwhile, a criminal investigation is underway following suspicions that managers delayed one particular safety recall report for eight years. Akio Toyoda, the founder’s grandson, has been put in charge of a ‘back-to-basics’ campaign intended to rereemphasise the importance of quality over cost-cutting or pure design. Despite these hitches, Toyota’s reputation for producing quality cars remains strong. A key reason behind this and the carmaker’s financial success, is its Toyota Production System (TPS). This has as its central philosophy the aim of ‘the complete elimination of all waste’, whether that waste is in the form of excess stock, an unnecessary process step or defective products.

The TPS is based on a number of key principles (see below), such as ‘kaizen’, which can be translated as continuous improvement to eliminate waste. Whenever Toyota has set up production in locations outside Japan it has sought to ensure the TPS approach is incorporated in the new facility.

However, with Toyota soon to be the largest car producer in the world, questions are being4 asked about how the company can keep generating improved results. The TPS has already been extended up the supply chain, to bring in external suppliers under its philosophical and operational umbrella.

Now, attention is being turned to Toyota’s retail operations to see whether dealerships could improve customers’ buying experience and hence not only immediate sales figures, but also repeat business. “Toyota is trying to transfer these TPS values into the retail sector,” says Gary Reed, director of research at the Centre for Automotive Management at Loughborough University...
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